Recent Posts

The largest company in the world decides to attack a smaller
player that is entering on a portion of the market where it is
currently dominating. You may have thought of Apple’s continuous
legal battle with Samsung but I was thinking of what led
Microsoft to be declared a monopoly in 1997. So is it time to
start thinking about Apple as a monopoly?

Big target

Since it became the largest corporation in the world, Apple has
increased its chances at becoming the target of all kinds of
lawsuits and disapproval. The recent issues around treatment of
workers at the Foxconn plants are only the beginning and one can
expect Apple to fall to more and more scrutiny which begs the
question as to how long it will take before the company becomes
the target of an antitrust lawsuit and there may be a number of
reasons for which the company could be targeted.

With near-control in spaces like digital players (the iPod), tablets (the iPad), online music (iTunes), and ultrabooks (the Macbook Air), Apple’s position
as a monopoly based on technological superiority and economies of
scale. But majority ownership of a market does not a monopoly
make. If it did, many more companies would be investigated for
monopoly power at one point or another. What generally leads
companies to being accused of being a monopoly is when they act
in a way that is hurting their competitors.

… and competitors are starting to make the case for abuse of
power.

Gathering clouds

There has long been concerns on the part of the music industry
about the power Apple has gained over it. The iTunes store
represents the majority of online music sales and has, as a
result, been able to essentially get the music industry to agree
to pricing terms that have made manyartistscomplain. It is generally assumed that the US$.99
price that has become the standard for online music tracks was
something that Steve Jobs kept insisting on and that the music
industry had little say in the matter. There is already a case wending its way through
the California court system on this.

The dangers of being called a monopoly

Roll the tape back 15 years and the largest tech player was
Microsoft, which also was the largest company in the world in
terms of overall market capitalization. When Windows 1995 came
out, the first calls regarding monopoly power came along but most
people felt that the company was doing a good job. Then Netscape
starting failing and decided to complain to the US Department of
Justice about the fact that Microsoft was bundling its internet
browser with its operating system.

This idea of bundling served as the basis of complaint and the
claim that Netscape was failing because of the fact that
Microsoft could crush competitors by just adding similar
applications to its platform and bundling them in for free. From
a logical standpoint, it may not quite be the case: for example,
on the consumer end, Microsoft bundled an online service
(MSN) but failed to gain traction against America Online; on the
server end, Microsoft bundled the IIS web server with their
server offering but Apache and Linux continued to thrive.

Similar arguments will be made around Apple’s power and its
bundling of the iTunes store and the app market with the iPhone
and iPad, as well as its integration of OSX and AppleTV into a
complete Apple ecosystem. The claims of this being the reason for
their competitor’s failures will hold about as much logical
weight as the ones against Microsoft did but the problem is that
it will not matter.

Once Apple has been convicted in the public court of opinion, no
matter what the verdict on an antitrust case it, it will push the
company to be more tentative and more hesitant, losing some of
the swagger it currently holds. For Microsoft, what it meant is
that the company became a lot more worried about appearing like a
monopolist and its bureaucracy became heavier, ensuring that the
company would not do anything that would get it into legal hot
waters. The net net is that the company’s own hesitation in
entering certain markets and its insistence on not playing a very
heavy hand when it did enter new markets made it an underdog in
most of the areas where it needed to go.

Can it avoid it?

The big question is whether Apple can continue growing and avoid
being charged with any form of antitrust or monopoly crimes. As
it grows bigger, it might become increasingly difficult to
navigate. The company is current doing a good job in terms of
managing the Foxconn crisis and it looks like the capable people
in the management team may be able to navigate through the
minefields of monopoly lawsuits.

Pointing to how most of the money in the app market goes to
developers will go part of the way in helping them counter
critics but they may have to watch out if the music, TV, movie,
or publishing industry decide they need more power in the
relationship. Managing the right balance of power will probably
be but one of the greater challenges Apple will have to face in
the future.

Today, Apple sits at the top of the technology landscape but
tomorrow, after the antitrust and other monopoly related lawsuits
start popping up, the company may grow more hesitant and could
eventually lose some of its power as a result. I fear that top is
getting closer: with no real competitors but itself left, Apple
gets to look at the rest of the industry and savor the moment
when it is king but the question remains as to how long it still
has in this position before the revolutionaries call for its
head.